Re-mortgage following Divorce

moneyfoolish

My daughter is in the process of getting divorced. She and her husband have 2 houses and both work in Switzerland. Her husband will be getting the house in Switzerland and my daughter will get the one in the UK which is currently being rented to another of my daughters. My daughter wants to know if, once the divorce is finalised whether she will be allowed to take her (then) ex-husbands name off the existing mortgage which was taken out originally when my daughter and her husband were living there or whether she will have to re-mortgage the property as she believes it will then become a buy-to-let mortgage and will cost her around £20,000.

lisyloo

whether she will have to re-mortgage the property as she believes it will then become a buy-to-let

Are you saying she's currently renting the property but has a residental mortgage?
Did the lender agree to allow the rental on the current mortgage?
Is she paying the correct amount of income tax? (there might be CGT if she gains half a non-residential property).
Does she have landlords insurance in place?

Thrugelmir

moneyfoolish wrote: »

My daughter wants to know if, once the divorce is finalised whether she will be allowed to take her (then) ex-husbands name off the existing mortgage

Not as simple as having a name removed. She'll need to effectively apply for a mortgage in her own right. The fact she's been working abroad and letting the property will then become apparent.

will cost her around £20,000

Seems a lot to switch to a BTL. Or is this the price to be paid for previous undisclosure.

lookstraightahead

I don't know about the rental side but when I was divorced I had to sell the house as the multiples on my income didn't stack up, which I presume will be the case here. The banks agreement is with whom it was originally agreed.

moneyfoolish

lisyloo wrote: »

Are you saying she's currently renting the property but has a residental mortgage?
Did the lender agree to allow the rental on the current mortgage?
Is she paying the correct amount of income tax? (there might be CGT if she gains half a non-residential property).
Does she have landlords insurance in place?

Yes, the lender agreed to allow rental on the current mortgage. I don't know her tax situation. It will be her only property as she is renting a property in Switzerland. In fact, now I think about it I believe when they were together they were renting in Switzerland but she is getting the house in the divorce settlement.

Currently she pays for Buildings insurance and my daughter who is renting pays for contents insurance.

lisyloo

It will be her only property as she is renting a property in Switzerland.

It's not clear whether she is going to live there, but if she is not living there and renting it out then it's still a rental property and not her home (residential).


She'll need to have the mortgage in her name.
Normally BTL mortgages depend on the rent and not her personal income. I'm not sure what happens in this case as this is a residential mortgage where renting has been allowed.

Currently she pays for Buildings insurance

She needs a landlords policy not a residential policy (not saying she's got the wrong one but she might have).

as she believes it will then become a buy-to-let mortgage and will cost her around £20,000

Not sure what she's based that on (perhaps she has a great deal that she thinks she'll lose).

In general BTL mortgages and insurance are more expensive because the risks are greater.

moneyfoolish

lookstraightahead wrote: »

I don't know about the rental side but when I was divorced I had to sell the house as the multiples on my income didn't stack up, which I presume will be the case here. The banks agreement is with whom it was originally agreed.

She's fortunate in that she has a decent job in Switzerland and the salaries there are very high (as is the cost of living!) so she wouldn't need to sell the house although I don't think she will ever come back here as she loves Switzerland and is in the process of applying for permanent residency.

lisyloo

It really is up to the lender.
Policies have changed (been tightened up) so it is possible that her lender will want the mortgage to be on a proper footing which will be more expensive (higher interest rate).

foxy-stoat

Wonder if the tenant is deducting the tax at source and paying the HMRC directly.

AdrianC

She currently has a residential mortgage and CtL, together with soon-to-be-ex.
She needs to remortgage, and since the property is currently let, that will need to be a BtL mortgage, yes.

£20k does sound a lot, although interest rates for BtL will be higher, so looking over the life of a large mortgage, it could easily be feasible. The same issue would apply on any remortgage, of course.


Perhaps a bigger issue will be finding lenders unwilling to have a tenant who is a close family member - and being the borrower's sister will certainly count. I'm surprised that's not been an issue for the CtL, tbh.